SHANGHAI, Jul 26 (SMM) — Shanghai base metals mostly climbed higher on Monday morning as the economic recovery is uneven, and the spreading COVID-19 pandemic loosened the market concerns of money policies. Meanwhile, their counterparts on the LME traded mixed.
LME base metals basically rose last Friday. Copper gained 1.74%, aluminium rose 1.74%, lead fell 0.59%, and zinc increased 1.45%.
SHFE base metals performed similarly. Copper rose 1.12%, aluminium increased 1.09%, lead fell 0.8%, zinc gained 0.79%, and tin won 1.74%.
Copper: Three-month LME copper rose 1.74% to end at $9,624/mt on Friday night, and is likely to trade between $9,580-9,680/mt today.
The most-traded SHFE 2109 copper contract climbed up 1.12% to close at 70,360 yuan/mt in overnight trading last Friday, and is expected to trade between 70300-70900 yuan/mt today, with spot discounts at 260-360 yuan/mt.
The US Markit manufacturing PMI in July came in at 63.1 on Friday, setting a new record high. However, the service industry PMI unexpectedly fell to a low of nearly five months, indicating that the current economic recovery is still uneven. The mixed economic data and the spreading pandemic continued to ease market concerns about early capital contraction. In addition, the strong performance of the US Q2 financial report released on Friday has boosted investor confidence and promoted the three major US stock indexes to hit new closing highs, which drove up copper futures. The rising futures suppressed the purchase in the spot market, and holders lowered quotations. More long positions were closed at high prices. September contracts will be the mainstream contracts this week, as the trade of August contracts has declined, which led to the lower premiums. However, the copper stocks in Shanghai remained low, and the downward room for the premiums is limited.
Aluminium: Three-month LME aluminium rose 1.74% to close at $2,508.5/mt in the overnight trading of last Friday.
The most-active SHFE 2109 aluminium contract increased 1.09% to end at 19,540 yuan/mt last Friday night.
The current aluminium consumption showed signs of weakening, but the inventories of aluminium ingots was still going down. The social inventories of aluminium ingots declined 23,000 mt to 809,000 mt last week. National Food and Strategic Reserves Administration announced to release 90,000 mt of aluminium reserves in the second batch, which was still lower than expected. Aluminium prices rose under the stimulus of market sentiments. Attention needs to be paid to the progress of power curtailment, the floods in Henan, inventory inflexion points, and long-short. SMM expects aluminium prices to fluctuate at high levels in H2 2021, with the support of costs and low inventories in the year. On the other hand, expectations of overseas interest rate hikes and domestic regulatory measures is forcing the prices down.
Lead: Three-month LME lead ended 0.59% lower at $2,364/mt last Friday. US dollar stabilised after fluctuation on Friday night, and LME non-ferrous metals rose across the board. However, short positions were increased in the market, which slowed down the gains. LME lead stocks kept falling, and the prices stood volatile above $2,300/mt. Whether the prices will fall back and test the support line at $2,300/mt will be the focus today.
The most-liquid SHFE 2109 lead edged down 0.80% to end at 16,215 yuan/mt in the overnight trading last Friday. Bulls reduced positions to avoid risks as SHFE lead was dragged down by LME lead. Spot trade remained sluggish recently. The weak consumption and expectations of inventory increase may fail to support the high prices. The support line at 16,000 yuan/mt is worth attention today.
Zinc: Three-month LME zinc gained 1.45% to close at $2,978/mt last Friday, with open interest up 2,461 lots to 249,000 lots. Zinc stocks across LME-listed warehouses fell by 175 mt or 0.07% to 247,300 mt. The three major US stock indexes all hit record highs last Friday, boosting the LME market.. The initial value of the PMI in July indicated that the US economic growth rate has slowed down for the second consecutive month, and the market expects that the monetary policy will continue to be loose, which will boost the zinc prices. Fed meeting next week is worth attention. LME zinc is expected to fluctuate between $2,930-2,980/mt today.
The most-traded SHFE 2109 zinc contract settled 0.79% higher at 22,355 yuan/mt driven by strengthened LME zinc on last Friday night, with open interest up 8,644 lots to 82,716 lots. Social inventories of lead ingots stood low last week, and the high spot premiums still supported zinc prices. However, the released 80,000 mt of national zinc reserves this month made up for the reduced supply due to the power curtailment, which released more signals to suppress the bulls’ confidence. Zinc prices are expected to remain volatile at high levels. The September contract is expected to move between 22,000-22,500 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 170-180 yuan/mt against the August contract.
Tin: The most traded SHFE 2109 tin contract won 1.74% to end at 234,560 yuan/mt last Friday night.
The September contract has replaced the August contract as the most traded contract last Friday, and the open interest kept rising. The overall prices is expected to continue to fluctuate higher with the fundamental support. However, whether the prices will go up in the short term will be dominated by the operations of the long funds that has recently entered the market.
SHFE tin is expected to trade above 231,500 yuan/mt today.